This is a blog by a former CEO of a large Boston hospital to share thoughts about negotiation theory and practice, leadership training and mentoring, and teaching.

Tuesday, September 25, 2007

Yet another page from the playbook

Another in the continuing series about the tactics used by the Service Employees International Union during its union organizing efforts. In other jurisdictions, the SEIU has opposed hospitals who wanted to issue bonds to support clinical activities and projects. A key reason: To apply pressure on boards of trustees and management to agree to concessions that would tend to increase the chance of the union's success in organizing the workers.

Here in Massachusetts, the state agency charged with reviewing and ruling on such issues is Mass HEFA, the Health and Education Facilities Authority. This is a highly respected agency, one of the largest of its types in the country. It has diligently and professionally reviewed applications by non-profits to float bond issues for several decades.

Recently, Caregroup, the nonprofit corporation that owns BIDMC, Mt. Auburn Hospital, and New England Baptist Hospital, filed a notice with HEFA concerning a potential bond issue to fund capital improvements in the three hospitals. SEIU personnel have been monitoring this process and have most recently filed a Freedom of Information Request asking for documentation between CareGroup and HEFA on this proposal.

Of course, all information covered under the state's FOI law will provided, as it would be under any legitimate request. But this activity by the SEIU raises the question of whether the union intends to try to delay the issuance of such debt or to try to have unusual conditions applied to it, and if so, for what reasons and for what purpose.

[Disclosure: Many years ago, well before taking this job, I provided consulting services to MA HEFA in support of its effort to create an energy-purchasing cooperative for colleges, universities, hospitals and other non-profits across the state. The program, PowerOptions, remains in service to many non-profits in the state and continues to provides financial savings on their energy bills. I currently have no financial relationship with the agency and have not had any during any part of my tenure at BIDMC.]

10 comments:

I don't know very much about SEIU, or utilizing FOIA requests as a pressure tactic, but there are legitimate reasons to question the issuance of tax exempt bonds to institutions in Boston.

Exempt institutions and governmental entities already account for 53.1% of the property tax base in Boston. Simply put, that means the remaining 46.9% of us shoulder 100% of the property tax burden. If you then exempt taxation of the interest on debt instruments that exempt facilities issue, the burden on the average Joe or Jane becomes that much greater. Taxes, whether income taxes or property taxes, are a zero sum game. If exempt institutions don't pay, or if they are priviliged to issue debt instruments which result in someone else's investment being exempted from income taxes, then the deficit must be made up by the rest of us - those who do not enjoy exemptions or have enough capital to invest in bonds.

The great irony of HEFA bonds is most apparent when you consider college dormitories in Boston. Dormitories pay no real estate tax and are often financed through HEFA. Therefore, we are subsidizing the housing of out-of- town students when we offer no such tax exemption to Boston apartment dwellers of moderate means. The result of exemptions is an onerous, regressive tax on those with the fewest resources - renters. So maybe, since many of the renters may also have an interest in SEIU (hospital workers; cafetria staff;nurses), there is something else afoot here. Like maybe a SEIU would loke to see a little tax equity? (And please don't tell me about Payments in Lieu of Taxes - they are not part of the tax levy and provide no relief to property tax payers - which includes renters. At $12MN a year PILOT is a drop in the ocean of Boston's billion dollar budget.)

There also might be legitimate reasons to question the continuing medical arms race in the Longwood area and beyond, particularly in a state that has some of the highest medical expenses in the country, critical shortages of primary care, and not nearly enough public health. The new buildings and capital improvements might be good for the bottom line of the institutions, and for their competitive position vis a vis rival institutions. But is this the best use of our resources? Since we don't believe in real health planning, we'll never know. For someone who believes so strongly in public disclosure, I find it ironic that you're attacking the SEIU for seeking more information from these bond documents. Anyone who follows health care finance knows that the best source of detailed information about health care organizations is in bond documents--detail that helps one understand the true financial picture and competitive position of the institution that prepares them. This doesn't mean that SEIU is going to challenge the new projects, although organizing 101 would suggest that this would be a natural tactic to consider.

I am sypathetic on the cost points you raise, especially the primary care issue. Please check my post on this topic, too: http://runningahospital.blogspot.com/2007/09/simple-questions-simple-answers.html.

Katie D,

The issue of whether non-profits should have access to tax-exempt financing is an important one that has had lots of debate. For all the Boston hospitals, not having access to this source of funds would simply result in the pass-through of higher medical costs. Nonetheless, if the SEIU wants to address that in general, the forum is the US Congress, not interfering with a particular bond issuer's plans for purposes of enhancing a union organizing campaign.

I think both the above respondents' points are well taken, but what I find most interesting about this blog has nothing to do with financing. It is that it puts on display a prototypical management response to the threat of union organizing. When are we ever going to get beyond this adversarial paradigm and begin to adopt both attitudes and practices that demonstrate a clear understanding and appreciation for the interdependence of labor and management? What is leadership at BI Deaconness doing to get inside the issues of greatest concern and consternation to its employees, including those low-wage employees who literally create and maintain the environment through which safe and effective care can be delivered? If leaders saw identifying and addressing these concerns as a regular and essential aspect of "running a hospital," they may discover that the solutions that can be generated in direct, every-day partnership with employees accomplish more for improving their wellbeing and the quality of the hospital than conventional union tactics ever could.

Interestingly, Katie in her response exhibits precisely the habit of mind that truly breakthrough leadership demands. She thinks through "why." Seems to me that has to be the first step in finding a better way.

Good points, Stephanie. Of course, we are doing many, many things for those workers and others, too. We value our staff very highly and want to provide opportunities for personal and professional growth and also to have a very, very good work environment on other fronts -- for them and our patients.

But please recognize that is is not a commentary on prototypical union organizing. It is a description of an organizing campaign that seeks to denigrate the reputation of a hospital as a step in the organizing process. Please see earlier postings on the topic.

Sorry - I think that Katie D's comments miss the point pretty widely. If the Mayor / City Council / state administration decide that they want to constrain the growth of the local non-profit sector (medical, religious, universities, social service agencies), it's completely within their power to do so by defunding HEFA or otherwise limiting access to non-profit debt. That they haven't done so suggests that they recognize that this sector has more to contribute to the region's economic and social health than just property tax dollars paid on dormitories. Homeowners, of course, pay far lower property tax rates than owners of rental property, who pay far lower rates than owners of commercial property - so much for "tax equity"! The state provides a lending vehicle for tax-exempt debt, but the tax-exempt status of non-profit educational and charitable institutions is a feature of the Federal tax code and has been for many, many years. Does Katie think it should be revoked in the name of tax relief for apartment renters?

I truly do not wish to co-opt Mr. Levy's excellent blog, so this will be my final comment. Stephanie Jordan Brown - Thank you for your kind and complimentary words. You didn't just make my day, but probably my whole year.

Anonymous (9/27 at 12:58PM) - just a little bit of information. Apartments are considered residential property. There are 2 property class rates: residential at $10.99/per thousand and commercial at $26.+/per thousand. The reason that residential taxes are actually more onerous than commercial property taxes is that there is a ceiling on commercial taxation. Commercial properties have hit that celing in Boston and their taxes can only come down, which they have from over $36 a few years ago to the present $26. By contrast, there is no ceiling on residential taxes, but there is a floor below which taxes cannot fall. So - the sky is the limit when taxing residential property. Apartment renters are the most vulnerable because tax increases are passed along by property owners, so tenants effectively pay this regressive tax. Single family and condo owners of primary residence receive a partial exemption. Apartment dwellers do not receive any exemptions. To link this back up to union organizing - I would guess that many potential SEIU members would also be renters. Maybe this is a social issue SEIU could take up. As for revoking exempt status of charitable and educational institutions, perhaps some modifications should be enacted. It's hard to feel there is justification in exempting very profitable and extraordinarily well endowed non-profit institutions while we are cutting social programs. Mr Levy - thank you for the forum.

I find it rather ironic that Katie complains about universities building dorms for their students when there have been so many that have complained about these same universities owning too much residential property which they rent to students which depletes the housing inventory for the true residents of the city. Northeastern for one was a target of these people so Northeastern built and is currently building several new dorms to house those students which in return increases the housing inventory for year round residents.As for the hospital, these bonds help improve the services they offer to all of their patients including lower income residents. While one cannot overlook the impact such bonds will have on the hsopitals bottom line one cannot overlook the impact these bonds have on the hospitals ability to reach out to all the cities residents and provide them high quality healthcare. I'm sure that is not lost on HEFA when it comes to reviewing the hospitals application.

Stephanie,You state "When are we ever going to get beyond this adversarial paradigm and begin to adopt both attitudes and practices that demonstrate a clear understanding and appreciation for the interdependence of labor and management?" You go on to attack the hospitals approach to dealing with the union yet you don't question the unions approach to dealing with the hospital. It goes both ways. The unions approach is to attack the hospital, paint a really negative picture of how it treats its patients and workers and in essence makes one wonder why anyone would want to be a patient or employee here. Thats been their history when trying to get into other hospitals. They are so desperate to increase their membership that they will resort to desperate measures. The hospital responds to these criticisms which the union then uses to make it look like the hospital is attacking them. We can that here.And just so you know I am not in a management position and if an election were to take place I would be voting unless it is a department specific election and does not include my department

Anonymous, you are right. I did not address the union's approach in my response. Believe me if this blog were called "Running a Union" I would have had a version for them too! I agree with Paul that the union's approach could denigrate the reputation of the hospital. And I personally think the union letter Paul posted earlier that was sent to physicians before making it to him was rather "schwarmy." So I understand that it is natural to rise to the defense of the hospital. But how one chooses to do that makes all the difference if we are not to repeat the "history" you so aptly point out.

I think the best way to counter the union is by putting out a message that ultimately is more persuasive than merely pointing out that the SEIU is doing what the SEIU does.

I believe it is possible to disarm the union entirely by honestly and critically examining the validity of their claims. This begins by asking "why in the world are they going after this?" "Is it a valid issue?" And, if so, "what are we doing about it." Then make it known publicly how the issue has been, is being, or, ideally should be addressed.

It turns out that in this case the union is skirting around issues that are important to running - and improving - a hospital. We could argue all day about whether the union has any business at all talking about ED bed capacity, but we can't ignore the fact that this is a challenge. Who reading this blog would not be interested to know what BIDMC is doing about it? Paul references work going on in this area - so what does that look like? Are they redesigning flow? Rethinking triage? Redirecting non-urgent cases to community health centers, or better yet partnering with them to reduce preventable admissions over time?

Paul may be right that union letter is trying to use this issue to drive a wedge between the hospital and physicians. So why in the world would they think this would work? Are doctor-hospital relations tenuous to the point that a letter from an unknown union organizer could disrupt them? For some hospitals this could be the case, but I doubt that is so at BIDMC. It would be interesting to know how BIDMC works with its affiliated physicians to improve things like efficiency, care coordination & patient safety. Do you have a physician compact? Why or why not?

Ultimately its this kind of honest reflection and open sharing that is the hallmark of this blog and, frankly, any meaningful change initiative. So I guess if the union wants to talk shop, I say bring it on. That's the only way I can see of changing the conversation - and maybe even figuring out how the union could become a genuine partner to management instead of a distraction.